Restoration Hardware Turns Heads Despite Revenue Miss

Fourth-quarter revenue came in lower than analyst estimates, and earnings met views by a hair, but shares of luxury home-furnishings retailer Restoration Hardware Holdings (RH) jumped nearly 13% by midday in the stock market today.

Investors forgave Restoration for the revenue miss ($471.7 million vs. an expected $493.1 million) as challenging weather in December and January took a toll. The quarter ended February 1.

Revenue was still up 18% from a year earlier or 26% on a comparable-week basis. Moreover, comparable brand revenue growth of 24% was considered impressive in a weather-challenged period. The comparable factored in same-store sales growth of 17% and direct-sale comps of 22%.

Analyst Matt Nemer of Wells Fargo said in a Friday-morning note that it was the second highest comparable in Q4 "for all of retail," behind only home-goods retailer Conn's (CONN) at 33%.

"Restoration displayed expense flexibility usually reserved for larger companies and was able to keep SG&A (selling, general and administrative) dollars flat to Q3 to adjust for the softer sales," he noted.

The company also issued guidance for Q1 that was well above Wall Street's and said that its spring source books would amount to a head-turning 3,200 pages in 13 separate books, compared to 1,600 pages in six books last year. The fall catalog had been eliminated.

Restoration Hardware ended the year with 70 retail stores and 17 outlets. CEO Gary Friedman noted that full-line Gallery stores would open this year in Greenwich, N.Y., Los Angeles and Atlanta, and leases on five others are signed and negotiations underway in 25 more locations.

"Once our real-estate transformation is complete in North America, we believe we will deliver $4 billion to $5 billion in annual sales, achieve mid-teens operating margins and generate significant free cash flow," he said in the release.

In 2013, revenue was $1.55 billion, up 30% from 2012.

Restoration Hardware is marketing itself under the RH brand name and calls itself a "curator of design, taste and style in the luxury lifestyle market."

See Also

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07/16/2015 02:52 PM ET

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